The Reserve Bank of Zimbabwe (RBZ) has blamed the Russia-Ukraine war for the inflation bedevelling the country, an excuse dismissed by economic analysts who say the problem has always been there even before the war erupted.
Indeed, international media has reported that, in some parts of the world which directly relied on Russia, the Russia-Ukraine conflict led to a surge in global food, energy and fertiliser prices, threatening to make life harder for families especially in India.
But analysts in Zimbabwe noted that the inflationary environment has always been there in Zimbabwe before Russia invaded Ukraine on February 24, 2022.
This comes at a time when the Zim Dollar fell to more than ZWL400 against the US$1 at the parallel market. The” distorted” official interbank rate stands at ZWL165.
The Monetary Policy Committee (MPC) of the central met on 29 April 2022 to discuss the recent macroeconomic and financial developments and their impact on the economy. They concluded that the spike of basic commodities in Zimbabwe was as a result of the war in Europe.
“The Committee noted with concern the recent uptick in month-on-month inflation, from 7.7% in March to 15.5% in April 2022, and the increase in annual inflation from 72.7% in March to 96.4% in April 2022,” read a statement by the central bank governor John Mangudya.
“The increase in inflation was as a result of a combination of global shocks and the pass-through effects of the recent exchange rate depreciation on the parallel market, with a significant proportion of the inflationary pressures emanating from the impact of the on-going Russia-Ukraine conflict.”
“The committee further noted that “the existence of strong economic fundamentals suggests that the recent exchange rate shocks are a manifestation of negative sentiments or perceptions attributable to people’s past experiences with hyperinflation and inevitable losses incurred during currency reforms.
“The Committee further noted that the erosion of people’s savings due to inflation compelled them to try and avoid similar losses by holding the US dollar as a store of value.”
In an interview with Nehanda Radio, economist and former chief economist in the Ministry of Finance Masimba Manyanya accused the central bank of lacking skills in problem identification with regards to inflation in Zimbabwe.
Manyanya dismissed RBZ claims that the Russia-Ukrainian war was behind the economic situation in Zimbabwe. He noted that “the whole world knows we have stretched more than 15 years with inflation, way before the Ukrainian crisis”.
He further stated that “I see this problem being that of a discrepancy between what policy makers are busy doing and on the other hand the day to day experiences of the Zimbabwean citizens. That could be a very serious indicator of a failure of problem analysis in policy making levels.
“If you have policy utterances that fail to reflect the situation on the ground, then it means our perception of what the colossal problems are different. And we cannot say citizens are wrong because they experience the practical realities of life on the ground.
“The Zimbabwean people are experiencing an inflationary environment. This is linked to the stiff distortion in the exchange rate of domestic currency as compared to the US$.
“I think Zimbabwean citizens have become economists and we can easily add up one plus one to make two and people now are aware that the depreciation in the value of the domestic currency is linked to the steep increases in the prices of basic commodities not really the Ukrainian war.
“If we are not able to do a proper problem analysis in the process of policy development, then we are likely to end up with wrong solutions. And I think the allusion to the fact that the Ukrainian war is causing the inflationary tendencies in Zimbabwe, I think it’s misplaced because everyone knows that Zimbabwe has experienced macroeconomic instability and citizens have been exposed to this inflationary and highly unstable environment for many years before the Ukrainian crisis exploded.”
Manyanya added: “The policy management cycle must be guided by a clear and transparent process of problem identification. If we cannot identify the root problems that we face as a nation then it’s very difficult for us to create appropriate solutions.
“We end up with such solutions as the Ukrainian fallacy as the cause of our experiences with inflation in Zimbabwe. The whole nation knows we have stretched more than 15 years with inflation, way before the Ukrainian crisis.”
Zanu-PF activist Kudzai Mutisi also blasted the entire RBZ’s MPC for failing to proffer solutions to the financial and economic problems bedevilling the Southern African country.
“The entire RBZ’s MPC needs to be fired honestly. Instead of looking at their bad policies, they blame ‘negative sentiment caused by previous experiences’.
“Nothing useful will come out of Mangudya and his team. We wait for Mthuli Ncube (Minister of Finance) measures. Hopes are low though,” he said.